To many, negotiating the price of car seems more an art than a science. But when you think that way, the auto dealership has already won. Car salesmen are trained professionals who won’t spare any tricks to get you to spend as much as you possibly can for one of their vehicles. It’s their job, their pride, and what ultimately puts food on the table for them and their families.
But that doesn’t mean you can’t go on the offensive and take control of the situation, all while embracing the absurd song and dance involved. Perhaps the biggest benefit that you have going into a vehicle buying situation is the power of knowledge — if, of course, you do your homework first. As Alec Baldwin’s Blake character proclaimed in the iconic sales movie Glengarry Glen Ross, “A-B-C. A-Always, B-Be, C-Closing. Always be closing, always be closing.”
Research Online and Local Advertising
1. Settle on a Vehicle
If you walk into a dealership not knowing what you’re going to walk out with, you’ll get taken to the cleaners. Use car comparison sites such as Edmunds, Yahoo Autos, Automotive.com, and FuelEconomy.gov to figure out what vehicle you are going to purchase based on price, features, fuel economy, and all other considerations.
2. Find Out What Others are Paying
Websites like Edmunds.com and TrueCar.com allow you to choose a make and model, and then find out its factory invoice price, Manufacturer Suggested Retail Price, or MSRP, dealer price and average user cost. All of this information gives you a leg up over the majority of people who walk through the dealership doors.
3. Find the Loss Leaders
Certain vehicle models are used as ‘loss leaders’. This means that they are used in advertising by dealerships to get people in the door. The dealership actually loses money on these vehicles. Why would they do that? So that they can upsell customers to more feature-rich versions of the same model or switch them to entirely different higher-margin models altogether. If you’re looking for a bargain, focusing on the loss leaders is a good place to start. The vehicles that usually fit this role are the base models that you see all over television and print advertising (Chevy Malibu, Ford Focus, Toyota Camry, Honda Civic, etc.).
4. Know when to Buy
“Statistically speaking the best time to buy a car is the end of the week, the end of the month, and the end of the year,” says Kristen Anderson, an automotive analyst at TrueCar.com. Obviously, waiting until the end of the year isn’t practical for everybody. What if you have to buy in the near future? In a pricing analysis for the period between the middle of April and the middle of May, TrueCar.com pegged the best day to buy a car at April 26th, with an average discount of 6.6%. The worst: May 2nd, with an average discount of 5.4%.
Negotiate Without Setting Foot in the Dealership
Now that you know what you are looking for, it’s time to do some negotiating. The most effective type of negotiation usually happens before you ever get to the dealership. Here’s how to do it:
1. Be flexible. The more flexible you are on color and features, the better deal you will be able to get.
2. Find all the dealerships nearby. Depending on where you live, find all the dealership within a 50-mile radius. Visit their websites and find a manager or internet sales manager. Note their email address or fax number.
3. Spill the details. Send an email or fax to that person detailing exactly what you are looking for and asking them what is the absolute best “out the door” price they can offer. Mention that you are checking with all dealerships in the area.
4. Wait. Send the same email/fax to all dealerships and wait a few days.
That should result receiving pretty close to the lowest-price quote from all of the dealerships in your area. Dealerships know that those who research and get quotes online are much more informed consumers who are going to demand a lower price. If they want the sale, they have to win you over quickly.
Close your Deal
Once you get your lowest price, you can start the negotiating. You’ve done most of the hard work already and are a few steps ahead of most buyers — but don’t pat yourself on the back just yet. When negotiating, don’t be afraid to play different dealers off one another: “Bob’s dealership is offering me a few more features at $300 less than you are. If you can lower your price by $500, you have a deal.” Don’t be afraid to ask for more than you think you are able to get.
When you get to the dealership, make sure that they don’t do a switcheroo on you. If you get any less vehicle than what they promised or any additional fees above what they quoted you, walk right out the door — slowly, so they can stop you and apologize for the misunderstanding.
GE Miller writes about personal finance for young professionals at 20somethingfinance.com.